Continuation Of RP Till Appointment Of Liquidator Does Not violate IBC: NCLT

Continuation Of RP Till Appointment Of Liquidator Does Not violate IBC: NCLT

Orders he be paid until the date of the liquidation order

The Chandigarh bench of the National Company Law Tribunal (NCLT) has held that in absence of any order from the adjudicating authority (AA), the appointment of a Resolution Professional (RP) by the liquidator in its position, is not in contravention of the Insolvency and Bankruptcy Code (IBC), 2016.

It directed the liquidator to pay the professional fees to the RP for the unauthorized period of service.

The Coram of Harnam Singh Thakur (judicial member) and Subrata Kumar Dash (technical member), while adjudicating a petition filed in the Brij Lal Ashok Kumar vs Tara Chand Rice Mills Pvt. Ltd. case, disposed of the application.

Tara Chand Rice Mills was admitted into Corporate Insolvency Resolution Process (CIRP). In March 2018, Sameer Rastogi was appointed as the Interim Resolution Professional (IRP) and in May confirmed as the RP. His fee was fixed at Rs.4,00,000.

The RP filed an application under IBC seeking liquidation of the corporate debtor. The matter was first listed for hearing in December 2018. Vide its February 2019 order, the AA ordered liquidation of the corporate debtor. However, the RP continued to manage the operation of the corporate debtor up to the date of the liquidation order.

The original CIRP concluded in September 2018 and was extended up to December 2018. The Committee of Creditors (CoC) had approved the professional fees of the RP for the CIRP period or any extension thereof. However, from December 2018 till February 2019, the RP managed the affairs of the corporate debtor without the approval of the CoC. Thus, the CoC did not pay him for the extended period.

The RP, thus, filed an application before the AA seeking direction to the liquidator to pay its professional fees amounting to Rs.5,77,102. He pleaded that the fees be paid as a part of IRP cost on a priority basis.

The issue before the tribunal was whether the RP should be paid for the period beyond what was approved by the CoC.

NCLT observed that in the absence of any order from the AA, RP's continuation in the liquidator's position was not in contravention of the provisions of IBC.

The bench cited the National Company Law Appellate Tribunal (NCLAT) judgment in the Smartec Build Systems vs B. Santosh Babu & Ors. case.

Therein, it was held, "B. Santosh Babu performed the duty of the IRP and constituted the CoC, and thereafter, continued to function even beyond 30 days holding the designation of the IRP. As he moved an application for liquidation (though designated as IRP), we agree with the observations made by the AA that the CoC is to pay the fees and cost incurred by Santosh Babu. He also acted during the resolution process beyond 30 days till the date of the liquidation having not allowed to continue as a liquidator."

Thus, the bench observed that corporate debtor was already under liquidation. The liquidator was directed to disburse the professional fee of the RP at the rate approved by the CoC from December 2018 to February 2019, which meant until the end of the liquidation order.

NCLT ordered that the amount must be disbursed to the erstwhile RP before any other amount was distributed under IBC, as the fees came under the IRP cost.